Farming News Review - July 2006

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Policy issues CAP (etc.) support details/payments Grants Farm finance Product prices

Other crop news Other livestock news Inputs Marketing Miscellaneous

Policy issues

Discussions continued throughout the month with a view to securing a WTO deal but no signs yet of a conclusion. The G20 group of developing countries sought substantial cuts in EU tariffs and while the proposal is likely to be rejected by the EU, a compromise is still forecast. However the EU is unlikely to make any concessions until the US has made a move and given the fact that the US negotiating mandate expires at the end of July there is a real prospect of the talks being abandoned.
CAP reform is back in the public arena again. Gordon Brown indicated, in an address to the CBI, that “a radical reform of the CAP and a timetable to end all forms of agricultural protectionism” was the key to boosting world economic growth. The NFU accused the Chancellor of “shooting at the wrong target”.
Mariann Fischer Boel, EU agriculture commissioner, has indicated she wants single farm payments to be capped and the savings transferred to rural development schemes as part of the 2008 review of CAP reform. However, the pressure group, Farmers for Fairness in Europe, claimed she is “out of touch with reality and complacent”. Mrs Fischer Boel also believes that the existing dairy support measures, including milk quotas, should disappear in 2013.
An EU report, “Evaluation of the Common Market Organisation in the General Sector”, recommends the phasing out of set-aside and the elimination of intervention facilities in all member states other than Spain and Portugal. The report also proposes the consideration of capping single farm payments to large farmers.
The EU Commission has published “opening thoughts” on reforming the EU Fruit and Vegetable Regime. The draft document proposes that the sector should be incorporated into the Single Payment Scheme. Formal proposals are expected to be published at the end of this year.
A thorough review of the activities of levy boards in 2007 will be the prelude to the consolidation of boards into one, Levy Board UK, covering horticulture, potatoes, cereals, milk, pigs, beef and lamb.
The NFU Council has issued a policy aiming for a 0.9% labelling threshold for the presence of GM material in non-GM food and feed and a 0.5% seeds threshold. The Soil Association has claimed the NFU is biased towards GM Crops.

CAP (etc.) support details/payments

The Single Payment Scheme shambles rumbles on. Almost 20% of claimants have not received their full payments while over 2,300 have still received nothing at all. Some claimants who opted to receive euros rather than sterling have been paid in the wrong currency. The Government has agreed to pay interest at 1% above base rate on monies paid after the 30 June deadline. No response has been received from the EU Commission to the UK request to extend the deadline but it is expected to be rejected. The former chief executive of the RPA believes many of its problems are unlikely to have been resolved by the time the 2006 Single Payment is due.
The EU Commission agreed to extend the SPS penalty free submission deadline to 15 June with an absolute deadline of 10 July.
Many farmers seem to have decided the Single Payment Scheme is simply not worth the hassle. By early June the number of SPS forms submitted to the RPA was down by 15,000.
EU Agriculture Ministers have agreed the rural development budget at £50 billions in the period 2007 to 2013 but at least half is expected to go to the 10 member countries which joined in 2004. The balance is divided between the remaining 15 members countries on the basis of “historical allocations”. The UK will receive between three and four per cent of the budget despite having eight per cent of the EU’s rural population.

Grants/regulations/legislation/environment

The 2006 Agriculture Wages Order has been agreed following negotiations between the NFU and the TGWU. Increases range from 2.9% for most grades rising to 5.9% for Grade 1 and 6.8% for Grade 3.
The European Environment Agency believes Europe could source 16% of its energy needs from farm crops by 2030. It expects ethanol to be produced from by-products such as straw rather than specific crops such as sugar beet.
A £200,000 DEFRA grant has been awarded to Renewable Energy Growers Northern, the largest producer of green energy crops in the UK. The group produces over 10,000 tonnes of willow each year which is used as a fuel in power stations in North Yorkshire and Nottinghamshire.
Kilhallon Quality Meats has been awarded a Defra grant of £140,000 towards the cost of a new abattoir service in Cornwall.

Other matters of farm finance and tenure

According to a Bank of Scotland survey, average bare land prices in 2005 increased to £3,630 per acre with the highest recorded average in the West Midlands at £4,713 per acre and the lowest in Scotland at £2,813 per acre. Dairy land was most expensive at £3,722 per acre but has shown only a 45% increase over the past 10 years whereas the value of arable land has risen by 76%.
The latest Savills survey indicates that, to the end of May, there was a 34% increase in land marketed across the UK. In the south east the increase was 2003% but in the West Midlands there has been a decline of 27%.
Forensic accountants are investigating the financial affairs of Associa, the commercial arm of the NFU after it was discovered that profits between 2002 and 2005 had been overstated by £1million.
The UK Payment Index indicates that supplier payment times have risen from 51.4 days in 2004 to 52.3 days in 2005.

Product prices

A. Crops

With harvest fast approaching and the recent release of the USDA wheat stock report, estimating US stocks higher than trade expectation, feed wheat prices fell by £3 over the course of the month. Milling wheat prices continued to rise slightly as stocks of milling quality 2005 harvest wheat grow lower. With new crops barley only days away, prices have dropped back by £11/tonne to new crop prices. Peas and beans have risen by £7 and oilseed rape, peaking mid-month at £160 and dropping back in the latter weeks, finished £1 lower than May. New crops wheat prices, for November movement, have reduced to £72/tonne, £7 down on the deals available in May as the market adjusts to better knowledge of overseas production. The effect of the increasing confidence in biofuels, freshly fuelled by the announcement of a new Humberside plant with an annual appetite for 700,000t of wheat, is yet to have a marked effect on futures prices.
Average prices in late June (£/tonne, ex-farm): feed wheat 75, milling 84.50; feed barley 62.50; oilseed rape 153; feed peas and beans 87.
The average potato price continued its rise at the beginning of June, gaining a further £5/tonne to peak at £137 but, with the arrival of new crop earlies satisfying some of the general demand, a steady decline occurred in the latter weeks. The average price for 2005 main crop closed at £129/tonne but despite this, the prices for top grade Maris Piper held on to the May levels of £240/tonne.

B. Livestock

The lifting of the European export ban for beef saw average steer prices rise sharply, gaining 7p/kg over the first half of the month, but levelling off at 117p/kg lw, where it remained until close.
Average lamb prices gained a further 10p/kg over the course of the month to close at 155p/kg lw. It is still thought that Avian Flu is having a positive effect on price.
The average pig price continued to strengthen, gaining 2p/kg and finishing at 104p/kg dw. It appears that even the pig market cannot escape the World Cup as this price rise is being attributed to the increased German demand for pig meat.
Despite Tesco and Somerfield increasing milk prices on the supermarket shelves, prices continue to show a downward trend: six milk purchasers cut prices in May by between 0.1ppl and 0.5ppl compared to April deliveries and Dairy Crest, though not one of these six, also announced a 0.75ppl cut in liquid milk prices for July.

Other crop news

World grain stocks are forecast to be at their lowest for 20 years. Production in 2006 is expected to be 20 million tonnes down on 2005 and exportable surpluses in Russia and Ukraine are expected to be well down.
A survey undertaken by English Farming and Food Partnership has suggested that cereal farmers will need at least one million tonnes more off-farm storage capacity in the next three years. The age and lack of investment in on-farm storage is given as the primary reason.
According to “Economics of Cereals Production 2004”, a report commissioned by Cambridge University, 40% of farms cultivating more than 300 hectares are expected to expand by taking on more land. There is expected to be increases in set-aside areas and diversification.
The 2005 apple season has been concluded with low prices meaning very poor returns for growers. The Gala crop increased to 21,000 tonnes, still well below Cox at 62,000 tonnes but about 10% of Cox went for processing. Production of both Braeburn and Cameo doubled.
UK apple and pear growers are facing another difficult season. Some growers are reporting a “best ever” crop but many are predicting a crop less than 25% of that in 2005. Adverse weather conditions in May rendered spraying difficult and could result in an increased incidence of scab. However imports are expected to be well down this year which should help conditions for marketing the UK crop.
Normal Collett, the fruit marketing business, has opened a new distribution centre in Paddock Wood, Kent.
The strawberry season has been poor so far with supply substantially exceeding demand. Recent improvements in the weather plus the start of Wimbledon should see the situation reverse.
The UK cherry crop is now coming on stream but volumes are likely to be well down on last year because of adverse growing conditions.

Other livestock news

Milk output in the new quota year continues to be slow with production in the first two months 114m litres less than last year. This is reflected in quota prices at 3.5p per litre for 4% butterfat and only 0.3p per litre for leasing.
Farm assurance in the dairy sector is being transferred from the National Dairy Farm Assured Scheme to Assured Food Standards, the organisation which operates the Red Tractor scheme.
The Department of Education and Skills has decided to remove whole milk from foods offered to schoolchildren and to drop all dairy foods from 2008.
ASDA was forced to remove Brazilian beef from its supermarkets in June when it became known the meat was not produced to British farm assured standards. EU inspectors have discovered inadequate controls on residue and veterinary medicines in the Brazilian beef industry. UK and Irish farming unions have called on the EU to ban imports which do not match up to EU standards.
Detected cases on bovine TB in the first four months of the year are down 27% on 2005. Defra is unclear on whether this is a long term fall or just a blip. The number of cattle slaughtered has fallen from 12,000 last year to 8,000 this.
Following on from its “Sheep Better Returns Programme”, EBLEX has introduced the “Beef Better Returns Programme”. The initiative, which is grant aided by Defra, aims to generate better returns to farmers by promoting better knowledge and best practice.
Quality Meat Scotland has launched a three year project, “Scottish Sheep Strategy”, to improve profitability and efficiency. The project will encourage farmers to make greater use of breeding technologies.
A Defra report, compiled by Bob Bansback, has identified wide geographical variations in the efficiency of the national fallen stock scheme. Scotland and Northern Ireland come off best, the south east the worst. Defra has agreed to extend funding for the scheme to November 2008.
Fishmeal is to be permitted to be reintroduced into the feeding programme of ruminants as a result of an EU decision to allow feeding to young stock.
The UK has one of the lowest levels of salmonella (12%) in its large-scale egg-laying units according to a report published by the European Food Safety Authority. Poland is worst (78%) closely followed by Spain (73%), Portugal (70%) and the Czech Republic (67%).
While the number of cases of confirmed avian flu have reached 750 in the past five months in thirteen EU member states, infection rates have declined to only 17 in May. Swans have been the most commonly affected birds.
The EU Commission has agreed to pay compensation of Euros 65 millions to countries such as France and Italy as a result of low poultry prices since the outbreak of avian flu. UK producers will receive nothing as Defra refused to support a claim.
The British Wool Marketing Board has unsold stocks amounting to nearly 4m kg.

Inputs/Supply businesses

Robert Wiseman Dairies has bought the fresh retail milk business of Milk Link. The cooperative will continue to supply liquid milk to the dairy and will retain its milk and cream business at Okehampton.
Greenvale, the potato supplier, has been sold to a private company, Produce Investment.

Marketing

A Defra survey, “Family Food Expenditure” has revealed that, in 2004/05, consumers increased their spend on fruit, vegetables, yogurt and beef but falls occurred in whole milk and white bread. Semi-skimmed milk, fromage frais and yogurt all showed strong growth but whole milk fell by 18%. Beef increased by 3.5%, pigmeat continued to fall while volumes of potatoes fell by 5%. For the first time spending on eating out matched household grocery expenditure.
Another Defra survey has highlighted the fall in profitability of UK Farming Plc. In 2004 agriculture added less than 10% of the value added to the economy of the whole food chain, from input supplies to retail outlets. This will fall considerably further in 2005 with decoupling of CAP support.
According to the Office for National Statistics, the share of UK Farming Plc of a typical shopping basket has fallen from 47% in 1988 to 36%. The share of the UK household food bill has fallen to 26% and only 60% of food consumed in the UK is home grown.
The difficulties facing the dairy sector have been reflected in a 41% fall in full year profits at Dairy Crest and a six-month loss of £900,000 for Arla in the period to 31 March 2006 compared to a profit of £25 million in the same period in 2005.
Genus, the animal genetics business, increased operating profits by 60% to £16.9 million in the last financial year. In 2005 the company acquired Sygen, the pig genetic specialist.
UK cheese production is estimated to have increased by 5% in 2005.
UK based Wellpict-European has formed an alliance with Chilean firm Hortifruit creating Euroberryuk.

Miscellaneous

A new industry group has been formed to assess the future efficiency and procurement methods of the Schools Fruit and Vegetable Scheme.
A selection of awards in the Queen's Birthday Honours list; Professor Richard Penny (CBE); Countess Cranbrook, Reg Haydon and Professor Jules Pretty (OBE); Michael de Maine, Clements Tomsett and Philip Greed (MBE).
The costs of securing access under the Countryside Rights of Way Act have increased to £69 millions. It is estimated that if every member of the Ramblers Association has taken advantage of the right to roam, the cost will be £500 per walker.
Sir Ben Gill, former NFU president, is selling the bulk of his 107 hectare North Yorkshire arable unit.
The new head office of the NFU in Stoneleigh has been formally opened.
The National Counter Terrorism Security Office has advised farmers to tighten fertiliser security because of the risks of it being used as an explosive. There is apparently no truth in the rumour that a lorry load of fertiliser was seen this week being delivered to the offices of the RPA!
Last but not least Professor John Nix has been honoured with a lifetime achievement award by the NFU.